Supply Chains By the Numbers

December 30, 2014
8:59 pm

Tomorrow starts a new year.
It will take me a while to adjust. Intellectually, while I will know the year has changed, I will screw up, time and time again, by writing 2014 on documents for many, many months. For me tonight, sitting facing the city skyline in the dark, 2015 sounds so far in the future; but, I know that it is on the horizon.
I take the years that end in the numbers five and zero a bit more seriously than other years. These are a mark in time, a rite of passage, and a good time to reflect. When 2015 rolls in, for me, it will mark a decade of quantitative research focused on understanding the evolution of supply chain management. So, in this blog, I would like to reflect on what I have learned in this process.
Insights on Supply Chain Organizations
In the early years, there were no supply chain organizations. I like many other gray-haired supply chain professionals reported through a functional organization like manufacturing or transportation. For me, it was manufacturing. I proudly wore my red hard hat, yellow jumpsuit and tan safety shoes in a world of rhythmic machinery and constant manual scheduling. I loved to open the doors of the factory floor and hear the hum of production. I liked belonging to an organization that made things. It was a special club. This all changed.
In the mid-1980s, leaders like Colgate, Intel, and Procter & Gamble defined supply chain organizations where source, make and deliver functions reported through the same organization, and had a common leader. Today, we know that when these organizations defined with a focus on end-to-end processes there was better alignment, agility and resiliency in balance sheet results. They were pioneers: the exception, not the rule.
For the majority of companies, the supply chain organization is now 15-years old. It has seven functions reporting through the supply chain leader. The reporting of manufacturing and procurement organizations through the supply chain leader has the probability of the flip of a coin. There is only a 50% chance that manufacturing or procurement are one of these functions reporting through the supply chain organizations. Even today, most organizations are still very functionally defined. We are still very early in the definition of end-to-end supply chain excellence.
However, ever so slowly, things are changing. Today, roughly one in three companies have a Chief Supply Chain Officer (CSCO). While these positions look very different—varying by culture and structural definition—we can clearly see supply chain is rising in importance. There was no CSCO in the 1980s or 1990s. They first appeared on the scene in 2005. Today, the role is growing in stature and acceptance.

To drive progress, one in three companies also has a supply chain center of excellence. Organizational success is not guaranteed. Today, only slightly more than 50% rate these organizations as effective. Why? At first these numbers surprised me. I thought that they would be higher. So, we started digging into the research to gain an understanding. In our studies, we found that it comes down to the tug of war between functional excellence and the definition of end-to-end processes. They are quite different, and many companies have not defined supply chain excellence sufficiently to enable success. In addition, we find that the center of excellence will fail if:

There is not the right balance between push and pull. The highest rated supply chain centers of excellence let themselves be pulled into the business based on business demand. They do not make the mistake of forcing themselves on business leaders.
It does not serve the business. Many supply chain centers of excellence become academic and irrelevant. To be successful, the center needs to serve the business and help to align tactics to achieve business strategies.
Cannot stay relevant. The center of excellence must have a stake in the game and carry a portion of the business goals. It cannot be relevant if it is a part-time, or understaffed, superfluous organization.

Are you interested in understanding more? Help us to help you better understand supply chain centers of excellence by participating in our research study on what makes a center of excellence successful. We hope to hear from you!
… this is the last blog of 2014. It is my 300th blog post on the Supply Chain Shaman. Check back in 2015 to read the 301st blog. Tomorrow night, I will raise a toast to my readers. All the best to you in the New Year!

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